Four Years Below Housing Bust Lows Makes the Freeze an Underwriting Assumption

Pending sales of existing US homes fell 2.3% in July from June, seasonally adjusted, to the second-lowest reading on record, a position now shared with July 2024 ^[1]. Economists surveyed by Bloomberg had expected no change ^[2], which is the number worth sitting with: the level forecasters treated as stable is one the market has held, mostly below the lows of the Housing Bust, for four straight years ^[3].

The index printed 71.2, the weakest since January ^[4], and January of this year remains the record low in the series ^[5]. On the history of that series the two accounts differ: Wolf Richter notes NAR's pending sales data only begins in July 2010, with closed sales going back to the 1980s ^[6], while the wire summary describes 71.2 as matching the second-worst level in records dating to 2001 ^[7]. Either way, the comparisons are ugly in the same direction. Against July 2010, in the middle of the Housing Bust, pending sales are down 9% ^[8]. Against July 2021 they are down 36%, against 2020 down 41%, and against the Julys of 2018 and 2019 down 33% ^[9]. A 36% decline leaves current contract activity at roughly 64% of the 2021 pace ^[10].

The regional spread is where the structural read gets harder to argue with. The West plunged 7.7% month-to-month to a new record low ^[11], down 7.1% year over year, 25.0% from July 2022, 47.4% from July 2021, and 43.9% from July 2019 ^[12]. That last set means Western contract signings are running at about 53% of their July 2021 level ^[13]. The South fell 2.2%, with only three other months as low or lower, and sits 32.2% below July 2019 ^[14]. The Northeast fell 2.0% and is 30.7% below 2019 ^[15]. The Midwest declined 0.7% after an 8.9% drop the prior month, and was the only region up year over year, at plus 1.7% ^[16][17].

Supply is no longer the constraint. Richter reports the highest supply of existing single-family homes in 10 years and condo supply at a 14-year high ^[18][19], with the cancellation rate on signed contracts running high ^[20], meaning even these pending numbers overstate what will close ^[21].

Mortgage rates in July ran 6.4% to 6.7% on Freddie Mac's weekly average, and have been inside that band since September 2022 ^[22] - about 46 months of the same rate regime ^[23]. Richter's argument is that these are normal rates in historical context, that the abnormality was the QE era, and that home prices have overshot what the market can bear while inflating carrying costs such as insurance premiums ^[24]. Whether or not you accept the framing, the operational consequence is identical: four years of volume at bust levels with rates stable and inventory rising is a price problem, not a patience problem.

What to watch: pending sales preview closed sales ^[21], so the July print sets the floor for autumn closings, and the high cancellation rate widens the gap between the two. Watch whether the West puts in a second consecutive record low, which would end the argument that it is a supply-constrained market. Watch the Midwest's plus 1.7% ^[17], the only regional data point supporting a normalisation story. And watch the rate band: it has held for 46 months ^[23], so a break in either direction is the first genuinely new input this market has had.